IRS Announces New Tax Preparer Regulations

January 26th, 2010 by Reed Allmand

You won’t see any changes this tax year, but the IRS is planning to require tax preparers to pass a test and register with the government so they can more effectively oversee a largely unregulated industry used by many taxpayers.

[Doug] Shulman [IRS Tax Commissioner] said he hopes to have all paid tax preparers registered by the 2011 filing season. Preparers will be given about three years to meet competency requirements, though there is much work to be done to develop standards and tests.

Eventually, tax preparers will be required to complete annual training and will be subject to penalties for unethical conduct, Shulman said. Taxpayers will be able to check the credentials of preparers on a public IRS database.

And while the new regulations won’t affect the 2010 tax season, the IRS is stepping up enforcement on tax preparers this year.  The IRS plans to send notices to 10,000 tax preparers who have a history of making errors on customers’ tax returns. Also, the IRS plans to make in person visits to tax preparers and some of them won’t be announced. The agency will send IRS agents posing as customers to see if the preparers give accurate advice. Lawyers, certified accountants and agents registered with the IRS won’t be affected by the new regulations.

The new regulations come as good news for many taxpayers who have been victims of bad advice given by unregulated tax preparers. For debtors who are considering bankruptcy, please remember, you will need to file your taxes this year and give a copy to your bankruptcy attorney. Be careful and make sure you work with an experienced tax preparer and avoid preparers who charge fees based on the size of your refund.